Industry reaction to APD change

Thomson and First Choice said they were “surprised and utterly disappointed” that the Chancellor has shied away from introducing Aviation Duty as announced in the 2007 Pre-Budget Report.

Customer director Tim Williamson said: “Yet again, the Government has chosen to target the aviation industry and more importantly, holidaymakers.

“APD was introduced as an environmental tax, yet we have seen the Government take no obvious steps to pledge the monies collected to invest in environmental solutions or ameliorate the impact from the emissions of UK aircraft.

“Nor does it offer any incentive for airlines to operate in an environmentally responsible manner, which should surely be criteria for anything that claims to be an environmental tax.

“We have spent a lot of time explaining to Government, that there should be a differentiation between Premium seats on charter flights and First Class on a scheduled flight, yet both have to pay double the rate of tax.

“A family who wants to spend its hard earned cash to pay for extra legroom on a holiday flight and a businessman, whose company has paid for a first class flight with a ‘flat-bed’, are both penalised to the same degree.

“Who will feel the pain of the double taxes? I doubt the businessman will. We will continue to lobby the Government till they realise quite how absurd this is.”

“We fully expect APD to be removed once all carriers enter the EU Emissions Trading Scheme in 2012.”

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ABTA said it was disappointed that the Government has chosen to continue with Air Passenger Duty “which is acknowledged not be environmentally efficient, and actually penalises those airlines which operate full aircraft”.

“As it now has four different distance bands, it means that passengers flying to Australia from 2009 will have to pay nearly 38% more than today, and 112% more in 2010/11,” ABTA said.

The association warned that the increase will put off travellers to destinations such as the Caribbean and Kenya, whose economies are extremely dependent upon tourism, particularly from the UK.

ABTA head of development Andy Cooper said: “The travel sector has not yet felt the full effect of the recession, but travel lags behind the rest of the economy by about six months and we are facing an extremely challenging 2009.

“The money being raised from APD will not be hypothecated to go to environmental causes, but will just end up in general government coffers, despite being grouped under the heading on how the government will deliver on environmental goals.”

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TTA and Worldchoice managing director Simon Hargreaves said: “The Government says it wants to help business. I find that hard to believe!

“The positive impact of the measures announced will be absolutely minimal on travel companies, while the damage from increased taxation comes at a time when we are all facing challenges from fluctuating fuel prices, plunging currency values and a hugely risk-averse atmosphere in the financial markets.

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Easyjet chief executive Andy Harrison said: “I am dismayed that the Chancellor has failed to carry through his commitment to reform a bad tax.

“All parties agreed that APD needed to be changed to a tax on planes not people, but now the government has succeeded in bodging-up the reform of an already bodged tax.

“He has made a bad situation worse by increasing the burden of APD on hard working families.

“The Chancellor said that he wouldn’t allow the economic crisis to ‘push aside the importance of protecting the environment’ but his green credentials have been brushed aside in a dash for cash and the emissions from cargo planes, private jets and transfer passengers continue to be tax free.

“So, Roman Abramovich, FedEx and Heathrow’s transfer passengers will continue to be exempt, but hard-working families going on their summer holiday on environmentally-efficient low-fare airlines will now pay even more.”

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Cheapflights welcomed the decision to drop the proposed Aircraft Duty but regretted retaining a modified APD.

“The Chancellor has made no provision to reduce the tax burden for consumers, especially lower income travellers,” the price comparison site said.

“Air travel is the only viable mode of transport for both leisure and business travellers for mid to long haul destinations.

“The increase in APD, especially on long haul, stated by the Chancellor as being for environmental reasons, actually harms the environment by delaying the introduction of fuel efficient and cleaner emissions aircraft.

“Furthermore, the option for travellers to fly from Paris or Brussels to long haul destinations looks increasingly attractive for both economy and for business class passengers with APD at £110 and £170 respectively.”

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The Board of Airline Representatives in the UK (BAR UK) had a mixed response to the Chancellor’s decision.

It said the decision to abandon plans to introduce Aviation Duty and retain the principle of the existing APD was ” a victory for common sense”.

But it said the decision to completely revise APD will see large-scale increases for all passengers flying 2000 miles or more.

Passengers flying in economy class beyond the EEA countries will see APD rise from the current £40 to a maximum of £85 by 2010/11, and those flying in all other cabin classes will see an increase from £80 to a maximum of £170 over the corresponding period.

BAR UK chief executive Mike Carrivick said: “The revised distance bands will cause anxieties to many airlines and also create some market distortions.

“Now is not the time to impose additional financial burden on the airline industry and the travelling public.”

By Phil Davies and Bev Fearis